Financial resources, technological advances, and business partnerships are key to natural gas globalization, ExxonMobil Gas & Power Marketing Co. Pres. Philip J. Dingle told an annual conference hosted by Cambridge Energy Research Associates in Houston Feb. 16.
"New technology developed by our industry has greatly reduced the cost of converting and transporting remote sources of natural gas as LNG. That is allowing more competitive access to remote markets and remote supplies," Dingle said.
ExxonMobil Corp. invests more than $500 million/year in technology research.
"We're developing new technologies that will lower LNG and gas infrastructure costs, and we're improving gas recovery techniques in previously uneconomic gas reservoirs," Dingle said of ExxonMobil.
Emerging LNG technology and new long-distance, large-capacity pipelines will provide an increasingly economic gas supply for consumers and will provide new opportunities for producers to develop and market remote gas, he said.
International gas projects require strong business relationships among governments, oil companies, and financiers, he said.
"What makes the gas business different from oil markets is that resource development in developing countries also depends upon fair regulatory climates in the consuming countries because the value chain for gas is tightly linked from the resource to the consumer," Dingle said.
International LNG partnerships reach "from the reservoir to the consumer," he said.
Challenges
The global gas business faces a bright future full of potential opportunities, but participants must overcome numerous challenges in order to survive and thrive, Dingle said.
A wellhead-to-market LNG project easily can involve more than 50 major contracts as well as numerous financing agreements, he said.
"It is critical to realize that the investors making significant capital outlays will require an adequate level of commercial certainty—both from the agreements that they enter into and also from the business environments where these are implemented," he said. "This is just as important as the steel, welding, and engineering that goes into these projects."
Governments in gas-producing countries must promote a business environment that encourages the massive, long-term investments that industry needs to build gas production along with the necessary LNG or pipeline infrastructure. "Such an environment requires a stable legal framework of predictable tax structure, clarity of contract, and an impartial court system, and a level playing field for all participants," Dingle said.
Growing interdependence
Consuming countries and producing countries need to recognize and manage their growing energy interdependence and the important role that each side can play in facilitating timely gas developments, he said.
Exporting countries want economic access to markets, while importing countries want secure, reliable energy supplies.
"The commitment to free-market principles in a consuming country is just as important as fair and open regulatory and fiscal treatment in producing countries. As markets are liberalized, regulators and governments need to remain patient and allow the market to function even when prices are volatile," Dingle said.
All these conditions must be met to sustain a favorable business framework, he said, noting that international gas projects are very complicated.
"It's not just about the money, and it's not just about the technology. It is also about the knowledge and the ability to marshal the collective knowledge and a commitment to make the project work," Dingle said.
All of the various stakeholders must work together to satisfy future world gas demand, he said.